Bschauer's the business case for or against service design sdnc11

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Today at the Service Design Network Conference in San Francisco I presented the Business Case For (Or Against) Service Design.

I care about service design because I come at it as a leader of an organization that design services for our clients. Therefore, it’s in my best interest to know how and why it delivers real value. The more value it creates, the more organization will seek out, use, and pay for our work in service design.

Read all at http://brandonschauer.com/post/11710895190/sdnc11

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Bschauer's the business case for or against service design sdnc11

  1. 1. — from UserExperienceWorks
  2. 2. At a train station inSeoul, South Korea
  3. 3. valueIt makes money
  4. 4. “How might we increase our sales volume without adding more stores?”
  5. 5. valueIt makes moneysystemsIntegrated and scalable
  6. 6. valueIt makes moneysystemsIntegrated and scalablepeopleHumans in the right places
  7. 7. valueIt makes moneysystemsIntegrated and scalablepeopleHumans in the right placesjourneysA few sensible touchpoints
  8. 8. valueIt makes moneysystemsIntegrated and scalablepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  9. 9. ServiceDesign
  10. 10. valueIt makes moneysystemsIntegrated and scalablepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  11. 11. The Business CaseFor (Or Against)Service DesignBrandon Schauer@brandonschauer
  12. 12. The Business CaseFor (Or Against)Service DesignBrandon Schauer@brandonschauer 16
  13. 13. SITUATION
  14. 14. Markets Revenue TrendsReturn onInvestment *BS Business Models Expenses* my calculations based on other factual data
  15. 15. MARKET SIZINGUsing a rough top-down estimate, the size ofbudget for service planning and design is BIG.Annual economic output 1 Wholesale trade, retail trade, transportation, and $0.5 Trillion public utilities Finance, insurance, real estate $1.5 TrillionTotal annual economic output $2.0 TrillionPortion of economic output from mid-and-large $1.0 Trillionscale firms (50%) 2Average margin on services 3 10%Cost of services sold $100 BillionAnnual investment in planning & design of services 4 2.0%Total annual investment in service design $2 Billion1 ‘The Role of Services in the Modern U.S. Economy’, U.S. Department of Commerce2 The U.S. Small Business Administration estimates half U.S. GDP is from small business3 Conservative round guess4 The U.S. spend 2.6% of GDP on R&D according to the OECD *BS
  16. 16. MARKET SIZINGUsing a rough bottom-up estimate, the size ofspending on service design appears smaller.Number of U.S. service design agencies 1 20 Annual agency book of business 2 $1 MillionTotal agency revenue for service design $20 MillionNumber of in-house service design groups 3 20 Annual expenses/charge-backs 4 $2.5 MillionTotal in-house expenditures on service design $50 MillionAnnual investment in service design $70 Million1 Estimate based on tally of listing on service-design-network.org and related sites2 Roughly ten $100K projects per year3 Gut estimate based on mirroring the agency estimate4 Gut estimate based on average staff size of 8 *BS
  17. 17. MARKET SIZING $2 Billion Estimated size of total dollars spent in U.S. on the planning and design of services *BS
  18. 18. MARKET SIZING $2 Billion Estimated size of total dollars spent in U.S. on the planning and design of services $70 Million Estimated total portion of these dollars spent on service design *BS
  19. 19. MARKET SIZING $2 Billion Estimated size of total dollars spent in U.S. on the planning and design of services $70 Million Estimated total portion of these dollars spent on service design *BS
  20. 20. COMPETITION How’s the rest of this work getting done? *BS
  21. 21. COMPETITION How’s the rest of this work getting done? System Engineers— Complete unscientific guessing of who’s doing how much *BS
  22. 22. COMPETITION How’s the rest of this work getting done? System Engineers Operations Management— Complete unscientific guessing of who’s doing how much *BS
  23. 23. COMPETITION How’s the rest of this work getting done? System Engineers Operations Management Branding & Marketing— Complete unscientific guessing of who’s doing how much *BS
  24. 24. COMPETITION How’s the rest of this work getting done? System Engineers Operations Management Branding & Marketing Customer Service— Complete unscientific guessing of who’s doing how much *BS
  25. 25. COMPETITION How’s the rest of this work getting done? System Engineers Operations Management Branding & Marketing Customer Service “The Organization”— Complete unscientific guessing of who’s doing how much *BS
  26. 26. COMPETITION How’s this work getting done? System Engineers Operations Management Branding & Marketing Customer Service “The Organization” Straight-up Service Designers— Complete unscientific guessing of who’s doing how much *BS
  27. 27. THE BUSINESSCASE FORSERVICE DESIGN
  28. 28. 362 firms 95% say they are “customer focused” 80% say they deliver a “superior experience” How many of these firms’ customers agree that they deliver a superior experience? 8%from “Closing the Delivery Gap” by Bain & Company
  29. 29. REMEMBER THIS? $2 Billion Estimated size of total dollars spent in U.S. on the planning and design of services *BS
  30. 30. OMGFor every $20 spent on ads for services in the U.S.,only $1 is spent improving that service. $40 Billion $2 Billion Estimated 2011 U.S. ad spends for top 5 Estimated size of total service categories: Local, Financial, dollars spent in U.S. on Telcom, Restaurants, and Travel & the planning and Tourism Services design of services photo by Seal Beach AT&T *BS
  31. 31. $40 BillionAd Spend Service Anticipation $2 Billion Gap Planning & Design of Services photo by Seal Beach AT&T
  32. 32. Service Anticipation GapThe loss of future potential revenuesand the wasted ad spend when aservice doesn’t meet or exceed theexpectations set with the customer.
  33. 33. Service Anticipation GapThe loss of future potential revenuesand the wasted ad spend when aservice doesn’t meet or exceed theexpectations set with the customer. Ad spend that Potential futureSAG = attracted customers who + revenues lost when customer didn’t engage didn’t engage
  34. 34. Overcoming SAGIncreased customer Increased customeracquisition and adoption loyalty and advocacyrates by planning and through user-centereddesigning for service planning of customerpropositions, sequencing, journeys acrossand flow touchpoints and evidencing of customer value
  35. 35. THE BUSINESSCASE AGAINSTSERVICE DESIGN
  36. 36. valueIt makes moneysystemsIntegrated and scalablepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  37. 37. value FiveIt makes money Fundamentals of Servicesystems DesignIntegrated and scalablepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  38. 38. value CurrentIt makes money service design is under-systems powered atIntegrated and scalable two of thesepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  39. 39. value
  40. 40. value — Where service design misses EXISTING NEW CAPABILITIES CAPABILITIESEXISTING Optimization ServiceCUSTOMERS DevelopmentNEW Market DiversificationCUSTOMERS Development — riff off of the Ansoff Matrix, circa 1957
  41. 41. value — Why service design sucks at it EXISTING NEW CAPABILITIES CAPABILITIESEXISTING Optimization ServiceCUSTOMERS DevelopmentNEW Market DiversificationCUSTOMERS Development — riff off of the Ansoff Matrix, circa 1957
  42. 42. value — Why service design sucks at it EXISTING NEW CAPABILITIES CAPABILITIESEXISTING Optimization ServiceCUSTOMERS DevelopmentNEW Market DiversificationCUSTOMERS Development — riff off of the Ansoff Matrix, circa 1957
  43. 43. value Where a dollar/won of sales goesRETAIL STORE SALES VIRTUAL STORE SALES89¢ 89¢ labor labor marketing marketingfor product overhead for product overhead location location profit profit *BS
  44. 44. value Where a dollar/won of sales goesRETAIL STORE SALES VIRTUAL STORE SALES89¢ 89¢ labor labor marketing marketingfor product overhead for product overhead location location profit profit3% PROFIT MARGIN 7% PROFIT MARGIN *BS
  45. 45. value Where a dollar/won of sales goes Service design should be tapping newRETAIL STORE SALES revenue by VIRTUAL STORE SALES sources of changing the89¢ economics. 89¢ labor labor marketing marketingfor product overhead for product overhead location location profit profit3% PROFIT MARGIN 7% PROFIT MARGIN *BS
  46. 46. value The value virtual stores addRETAIL STORE VIRTUAL STORE 100 Stores 25 Stores500 Customers/store 200 Customers/store$150 Average $/customer $75 Average $/customer$225,000 $26,250 10%DAILY GROSS PROFIT DAILY GROSS PROFIT ADDITION *BS
  47. 47. value The value virtual stores addRETAIL STORE VIRTUAL STORE$225,000 $26,250DAILY GROSS PROFIT DAILY GROSS PROFIT$2,250 $1,050PER EACH ADDITIONAL STORE PER EACH ADDITIONAL STORE *BS
  48. 48. value — Where service design should be playing EXISTING NEW CAPABILITIES CAPABILITIESEXISTING Optimization Market ServiceCUSTOMERS Optimization DevelopmentNEW Market DiversificationCUSTOMERS Development
  49. 49. value CurrentIt makes money service design is under-systems powered atIntegrated and scalable two of thesepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  50. 50. value ServiceIt makes money design is extremelysystems strong atIntegrated and scalable some of thesepeopleHumans in the right placesjourneysA few sensible touchpointspropositionLow risk—it could fail
  51. 51. SO WHAT?
  52. 52. THE TACTICS
  53. 53. THE TACTICS:FLOW-NOMICS
  54. 54. FLOW-NOMICSThe Peak-End Rule— from Daniel Kahneman
  55. 55. FLOW-NOMICSConversion funnels
  56. 56. FLOW-NOMICSConversion funnels
  57. 57. FLOW-NOMICS ROI ROB
  58. 58. FLOW-NOMICS Return on Behavior
  59. 59. THE TACTICS:DIGITAL
  60. 60. THIS MUST BESTOCKPHOTOGRAPHYFROM 1996.
  61. 61. DIGITAL low-volume, high touch high-volume, low touch
  62. 62. DIGITAL
  63. 63. THE TACTICS:LEANSERVICEDESIGN
  64. 64. LEAN Ideas Learn Build Data Code Measure
  65. 65. LEANUse of concept
  66. 66. LEANUse of concept
  67. 67. LEANUse of concept
  68. 68. LEANUse of concept
  69. 69. LEANUse of concept
  70. 70. LEANUse of concept
  71. 71. LEANUse of concept
  72. 72. LEANMature businesses can do it too
  73. 73. LEANIncreasing confidence of adoptionRelative advantageThe degree to which an innovation is perceived asbetter than the idea it supersedesCompatibilityThe degree to which an innovation is perceived asbeing consistent with existing values, experiences,and needs of users.ComplexityThe degree to which an innovation is perceived asdifficult to understand and use.TrialabilityThe degree to which an innovation may beexperimented with on a limited basis.ObservabilityThe degree to which the results of an innovation arevisible to others.
  74. 74. THE TACTICS:BLENDED TEAMS
  75. 75. The servicedesigner isn’t thecenter of it all:(
  76. 76. COMPETITION How’s this work getting done? System Engineers Operations Management Branding & Marketing Customer Service “The Organization” Straight-up Service Designers— Complete unscientific guessing of who’s doing how much *BS
  77. 77. In fact, the servicedesigner mightnot even be thecenter of a servicedesign team
  78. 78. BLENDED TEAMSproduct software servicedevelopment development developmentIndustrial Interaction ServiceDesigner Designer DesignerMechanical Front-EndEngineer DeveloperElectrical Front-EndEngineer Developer
  79. 79. BLENDED TEAMSStaff teams based on the expected outcome. EXISTING NEW CAPABILITIES CAPABILITIESEXISTING Optimization ServiceCUSTOMERS Development More Operations SavvyNEW Market DiversificationCUSTOMERS Development More Marketing Savvy
  80. 80. HERE’S THE PITCH
  81. 81. THE PITCHCapture lost revenues from the Service Anticipation Gapby applying just a portion of the overwhelming ad spendson the optimization and creation of services. Awareness Entry Engagement ActionTraditional Ad Spends Service InvestmentsInferences Highly measurableFades quickly Long-lasting investment
  82. 82. THE PITCHCapture lost revenues from the Service Anticipation Gapby applying just a portion of the overwhelming ad spendson the optimization and creation of services. Awareness Entry Engagement ActionTraditional Ad Spends Service InvestmentsInferences Highly measurableFades quickly Long-lasting investment
  83. 83. The Business CaseFor (Or Against)Service DesignBrandon Schauer@brandonschauer

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